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Tribunal upholds FCA fine and ban for former hedge fund CEO Alberto Micalizzi

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The Upper Tribunal has dismissed Alberto Micalizzi’s appeal against the Financial Conduct Authority’s (FCA) decision to fine and ban him over charges that he failed to act with integrity in his role as CEO at hedge fund Dynamic Decisions.

The Tribunal directed the FCA to impose a penalty on Micalizzi, the former CEO of the now defunct hedge fund, of GBP2.7 million (reduced from GBP3 million) and a full prohibition.  
Dynamic Decisions was the manager of the DD Growth Premium Master Fund which was marketed by as having a low risk, highly liquid, market neutral strategy. 
In the final quarter of 2008, the fund suffered massive losses amounting to approximately 85 per cent of its value. Micalizzi sought to conceal these losses from investors by deliberately misrepresenting the fund’s value and subsequently entering into agreements with third parties to acquire units with a face value of USD700 million in purported convertible bonds issued by a Nevada based company backed by Russian diesel oil. 
The Tribunal found that: “…events have now shown, beyond doubt, that the bonds were never genuine.”
“Mr Micalizzi deliberately misrepresented the position to the investors, and failed to provide them with information as to the true position, even when it was clear that they had been misled by the original information.  Such conduct can only be dishonest.”
Lenders “…did not know the true position was that they had been systematically misled by Mr Micalizzi.”
 “…in a number of respects Mr Micalizzi attempted to mislead the Authority.”
The Tribunal also said: “…whilst Mr Micalizzi was superficially plausible and appeared to be frank and helpful in his evidence, on analysis we have found that in many instances he was none of those things. In our view, in those respects where we have made findings adverse to him, he continued to attempt to mislead this Tribunal with regard to those matters in the same way he had misled investors, lenders, the Authority and others.”
As at 30 September 2008, the fund’s value was approximately USD437 million. The majority of this was lost by investors following the fund’s collapse.
In concluding the Tribunal said: “…the power to prohibit an individual from performing any function is a critical function in relation to the protection of consumers. It is an essential tool in enabling the Authority to achieve its strategic objective to ensure that markets function well, and its operational objectives to protect consumers and to protect and enhance the integrity of the UK financial system.”

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